EBA欧洲银行-Risk-assessment-questionnaire-July-2018_70页_3mb

Risk Assessment Questionnaire – Summary of Results (July 2018)

Introduction

The European Banking Authority (EBA) conducted semi-annual Risk Assessment Questionnaires (RAQs) in April and May 2018, collecting responses from 38 banks and 21 market analysts. The results are presented in an aggregated form and are published alongside the EBA’s quarterly Risk Dashboard (Q1 2018). The summary provides insights into the current and future outlook of the EU banking sector regarding profitability, funding, asset quality, and operational risks.

Summary of the Main Results

• Profitability: Banks’ profitability remains a challenge, though a slight improvement is expected in the near future. Market analysts’ views on profitability improvement are more conservative than in December 2017.
• Volume Growth: Banks expect growth in SME and retail lending, as well as commercial real estate. Market analysts share similar expectations.
• Funding Strategy: Banks continue to focus on meeting MREL requirements, targeting retail deposits and issuing more eligible instruments. However, uncertainty around MREL requirements remains a constraint.
• Asset Quality: Banks are optimistic about asset quality improvement, while market analysts are more cautious. Cyber risk and data security are identified as key operational risks.
• Operational and Conduct Risk: Cyber risk and data security are the main drivers of operational risk, with concerns about litigation costs also rising.
• Geopolitical and Regulatory Risks: Geopolitical uncertainties, including the UK's exit from the EU, remain a key risk. Regulatory risks, such as MREL and TLAC, are also highlighted by market analysts.
• Market Sentiment: Market sentiment is positively influenced by macroeconomic fundamentals and improved risk metrics for banks. However, increased volatility and geopolitical risks are seen as potential negative influences.

Core Sections Summary

1. Business Model / Strategy / Profitability

• Profitability Outlook: Less than 15% of banks expect profitability to increase in the next 6–12 months, down from 20% in December 2017. Market analysts show a similar trend, with 25% expecting improvement.
• Profitability Drivers: Banks identify net fees and commissions (about 90% agree) as the main driver for profitability, especially from asset management, payment services, and insurance. Cost reduction and net interest income are also key.
• M&A Constraints: Cost and riskiness of M&A are the main obstacles (40% of banks agree), with regulatory requirements and uncertainty on MREL also being concerns.

2. Funding / Liquidity

• Issuance of Instruments: Analysts expect banks to issue more T2 instruments (70%) and MREL/TLAC eligible debt instruments (65%) in 2018, down from 60% for AT1 instruments.
• MREL Focus: Banks continue to focus on MREL requirements, with 65% planning to issue more eligible instruments. 50% rely on retail deposits.
• Uncertainty on MREL: The uncertainty around MREL requirements is still a major constraint, though the share of banks highlighting this has decreased slightly.
• Central Bank Funding: No agreement exists on the expectation of increased central bank funding.

3. Asset Volume Trends

• SME Financing: Over 85% of banks plan to increase SME financing volumes, marking a shift from previous periods where some banks considered reducing exposure.
• Other Portfolios: Banks also expect growth in consumer credit, residential mortgages, and corporate exposures. Market analysts align with these expectations.
• De-risking: Banks plan to reduce exposures in sovereign, institutional, asset finance, and trading portfolios. Market analysts attribute this to regulatory pressure and asset sales, especially from NPL portfolios.

4. Asset Quality

• Improvement Outlook: Banks are optimistic about asset quality across the board, with 50% expecting improvement in residential mortgages and over 40% in CRE, SME, and corporate portfolios.
• Market Analysts' Views: Market analysts are more conservative, expecting deterioration in most portfolios, particularly CRE, consumer credit, trading, and structured finance.
• NPL Resolution Challenges: Banks cite lengthy and expensive legal processes as a major impediment to resolving NPLs.

5. Conduct, Reputation, and Operational Risk

• Operational Risk Increase: Over 60% of banks expect an increase in operational risk, driven mainly by cyber risk and data security.
• Litigation Costs: Over 30% of banks expect heightened litigation costs in the next 6–12 months. 40% of banks have already paid over EUR 1 billion in related costs.
• Cyber Risk: Cyber risk and data security are highlighted as key operational risks, with market analysts also noting their potential impact on market sentiment.

6. General Open Question

• Risk and Vulnerability Sources: Banks identify cyber, shadow banking, Fintech, and conduct risk as main sources of increasing risk. Market analysts highlight regulatory risks (MREL, TLAC, consumer protection), geopolitical risks, and economic developments like protectionism.

Key Takeaways

• Profitability Challenges: Despite a slight expectation of improvement, profitability remains a challenge for banks, with net fees and commissions and cost reduction being key drivers.
• Funding Strategy: Banks are focused on meeting MREL requirements and increasing retail deposits, while analysts are more cautious about issuing senior unsecured instruments.
• Asset Quality and Risk: Banks are optimistic about asset quality, but market analysts are more conservative. Operational risks, particularly cyber and data security, are rising.
• Geopolitical and Regulatory Uncertainty: The UK’s exit from the EU and regulatory requirements remain key concerns, especially for market analysts.
• Contingency Planning: Banks have widespread contingency plans for potential UK exit scenarios, but only 8% see material implications for their business.

Summary of Key Statistics

Conclusion

The RAQ results for the EU banking sector in Q1 2018 reflect a mix of optimism and caution. While banks are generally positive about future asset quality and volume growth, they remain concerned about profitability and regulatory uncertainties. Market analysts are more cautious, emphasizing the potential negative impact of geopolitical and regulatory risks. Cyber risk and data security are identified as critical operational risks, and contingency planning for the UK exit is widespread among banks. Overall, the sector is navigating a complex landscape with a focus on resilience and adaptation.